Under the Agridome

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In Ontario, there are lots of combines rolling through cornfields across the province. Much of this is happening east of London, Ontario, and in eastern Ontario where severe drought affected the crop this year. Yields are extremely variable, with some yields being off the chart bad while others are possibly a bit better than expectations. I finished my soybean harvest Wednesday, and I'll soon find out what secrets my corn crop has for me this year.

I expect big yields, just like they are across the United States. It has been somewhat interesting the last few days or even weeks in our grain markets without the USDA weighing in on crop size.

As you all know, I don't do politics here and especially don't do American politics. So, if somebody can tell me why the U.S. government is shut down, send me a message. Regardless of why it's happening, we do have a dearth of USDA numbers in October. In lieu of that, we are seeing contraction movements in future spreads and basis across much of the United States. It's almost a healthy contradiction. It's the market telling us maybe this crop is not as good as advertised.

Of course, who really knows. If the American government ever gets back to work, then surely, we will see some new numbers from the USDA. As it is now, the December-to-March corn future spread is that its firmest level since the first week in May. What's that say? Well, it does mean that maybe supplies aren't what they were thought of just a few weeks ago. It's also a reflection of the big demand coming for all that cheap corn that we have been led to believe has been out there.

Keep in mind, I've been talking about big supply for quite some time now. Officially, we are still talking 186.7-bushel-per-acre (bpa) corn and 53.5-bpa soybeans. It's still here, but our trading algorithms are working in a slight USDA vacuum. These algorithms are also operating in the "fog of harvest". Yes, it's big, but there are all kinds of issues regarding southern rust in some USDA counties and a firming basis is telling the story.

The December corn futures closed Thursday at $4.21, which is above the 100-day moving average for the first time since late September. We have not seen prices sustained above this level since earlier this spring. Meanwhile, as all of you know, combines are rumbling and it is the gut slot of harvest across many locations in the greater U.S. Corn Belt.

Meanwhile, our geopolitics has been boiling with the President Donald Trump putting together a 20-point peace plan for the Middle East. At the same time, not one U.S. soybean has been sold to China this year and that trend continues. At the present time, U.S. soybean exporters have over $0.90 per bushel advantage for December over Brazil soybeans. Cheap is a great elixir, especially when it comes to grain, but so far, the Chinese are taking a pass. At a certain point, you would think that somebody would blink. However, this is 2025 and it is a new world where everything isn't quite as it seems. Soybeans in the agricultural sense is one example.

All of this is very important with regard to its impact on agricultural prices and especially futures prices. However, keep in mind that as Canadians we're quite aware why the Americans haven't been selling any soybeans to China. It really isn't a surprise to us. That is partly reflected in the big demand in Ontario from China for soybeans, even though our supply is infinitesimally small compared to the U.S. or Brazil. As farmers in Ontario and Quebec, we must keep abreast of basis changes here, as well as the value of the Canadian dollar which continues to act as a stimulus to our Canadian grain prices.

The noon rate on the Canadian dollar, as of Thursday, was 0.7118 U.S. which is significantly down from what we've been used to during the past 18 months.

It might be the time where basis opportunities change the optics for Ontario and Quebec grain prices. Foreign exchange is very important and if the U.S. crop turns out not to be as large as projected, maybe the marriage of an increased futures price with the lower Canadian dollar does represent real opportunity for local cash grain pricing opportunities. The lowering the Bank of Canada lending rate to 2.5% in September was bearish to the Canadian dollar.

The challenge ahead will be to wrap up this harvest. October weather has been pristine. That's set to end this weekend, so maybe a little bit of mud won't be so bad for us. The challenge in the next few weeks will be to keep our heads while the market tries to make sense of all this noise. Harvest always brings clarity -- at least until the next USDA report or geopolitical flare-up throws another wrench into the gears. Work safely this harvest season, watch the basis closely, and hope that the combination of a weaker loonie and decent yields adds up to some opportunity for local cash grain prices. As always, it's a moving target, and 2025 is proving once again that grain markets rarely sit still for long.

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Philip Shaw can be reached at philip@philipshaw.ca

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